Personal Finance and Investing

Personal Fiance

Personal Finance

Personal Finance is the management in of one’s own money and financial well-being. Sometimes a person will hire a professional financial planner. One important thing to remember is that this is your own personal responsibility to set your own personal investment and finance goals.

Net Worth

Your net worth is Assets + depreciating assets- liabilities

What is a personal asset?

A personal asset can fit into two different categories. First an asset can make the owner money. When it comes to investing, an asset can be something that adds cash flow and increases income for the user. On the other hand, a depreciating asset is something that the owner derives value from but loses value over time. Eventually, the user will need to extent this asset after it has lost value.

Another example of a depreciating asset is capital assets. These are things such as home repairs. The cost of the asset gets added up over the useful life of the home. Unfortunately, this doesn’t add any resale value to the home in the long run.

What is a liability?

A liability is something that a person owes to someone else. This could be any type of loan or debt. The scary thing about this debt is that most people have too much of it.

Lastly, when talking about personal finance there are 3 schools of thought.

Wealthy Mindset

The wealthy person has very little debt and owns many money making assets.

Middle Class Mindset

The middle class looks like the wealthy person; however, they finance all there assets through debt. Unfortunately, they only appear to be wealthy

Poor Mindset

Lower class people only have liabilities. This type of thinking overspends and is drowning in debt.

The goal is to reduce your liabilities and increase your assets. Trying to get out of the poor or middle-class mindset is the American dream. To learn more go to Personal Finance